June 27th, 2020
I have more and more clients each year asking me about the benefits of getting a Reverse Mortgage in California so I decided to ask Lisa Korn, one of the state’s leading experts specializing in this specific type of loan product to write about her journey in gaining knowledge to help her clients. As you read this article you might identify with one or more of these scenarios. Feel welcome to reach out to Lisa, a Palos Verdes reverse mortgage lender, with questions and let her know you read about her in my blog…. (play intro video here)
“What if” scenarios to a Reverse Mortgage in California
Considering “What if…” seems to be a common thought process these days. As a reverse mortgage broker, I have had clients come to me with scenarios such as “what if I could get the money I need to replace my windows and finally make the updates that I have wanted to make for decades”, “what if I had the money to pay for my caregivers without having to worry about running out of money”, and even “what if I could save my home from foreclosure”. In fact, after twelve years as a mortgage broker working with traditional mortgages, three years ago I decided to focus solely on reverse mortgage as it was these types of concerns I wanted to help seniors re-solve. But when the Coronavirus came on the scene my family was suddenly forced into considering “what if” this furlough turns into the loss of a career in your early 60’s with the economy reeling, unemployment skyrocketing, after thirty-five years in a single industry?” Too young for Social Security, but most likely too old to “shut down and re-tool” in a new industry. This new reality would include added expenses such as a $2500-a-month insurance premium if we lose the company-sponsored health plan. This younger-than-anticipated retirement certainly sprung up quickly and was not a decision we expected to be facing at this time.
But I know we are in good company. There are so many others in our country in a similar situation. The economic changes in our world have forced many people to consider new, and very different, futures. But “what if” there are silver linings? In the same way that families with young children have been given a gift of a slower life and more quality time together due to schools being closed and children’s activities being put on hold… maybe early retirement is also a gift. It’s a time to consider what is important, where do I want to retire? Do we want to move closer to family so we can spend more time together? Do we want to leave the big house that now feels like a burden and find a low maintenance townhome that will allow us to lock the door and travel at a moment’s notice?
These considerations come at a time when more and more financial advisors are seeing the reverse mortgage in California product as an integral part of an overall retirement strategy. Reverse mortgages are no longer thought of as only a product of last resort for desperate seniors. Instead, these products give people with financial resources the ability to take control of their retirement jour-ney and preserve and grow their retirement assets. Financial advisors now see the merits of strategically taking withdrawals from a reverse mortgage line of credit in a down market, rather than portfolio assets, allowing depreciated assets to rebound. A reverse mortgage can also be the answer when divorcing seniors each want their own home but don’t want to take on a mortgage payment at this stage in life or when one sibling wants to keep the family home after the death of a parent and can buy out their siblings.
Aren’t Reverse Mortgages Scary?
But aren’t reverse mortgages scary? I wondered too. Being a super analytical and cautious investor myself I did my research. I asked financial experts I trusted to tell me if they saw something I was missing. I wanted to see if there was a “gotcha” I didn’t consider. There was comfort in knowing reverse mortgages were federally regulated by HUD and that they include numerous consumer protections put in place to protect seniors. Long story short, after meeting with a number of potential clients I realized I was not going to be able to solve all problems for all people. Some people get themselves into financial situations that are so tenuous that they just can’t be resolved that easily. However, ultimately I found that, like most financial instruments, when used responsibly, they can be a life-changer for many people.
Can you use this product to Buy a Home?
But perhaps the most surprising use of the reverse mortgage in California that most people, and many of their real estate agents, are not aware of is utilizing a reverse mortgage to purchase their next home. “What if” you sold your two-story home for $1,500,000 and bought a new one-level patio home or townhome in “name your favorite city” for a fraction of that cost. And “what if” you bought that same new home with a reverse mortgage?
In general, if you are over sixty-two you could put approximately half the cost of the new home down, invest the other half to grow for your benefit down the road, and (maybe best of all) have no principle or interest payment due for the life of the loan. How would that change your life? Where would you live? How would your life change? What would that allow you to do that you never thought possible? Would you now have the money to buy that sprinter van and travel the US? Would it allow you to move closer to family and have the gift of watching grandchildren grow up? What are your “what ifs”?
If you, or someone you know, are re-imagining a retirement plan, considering a severance package, considering a new home, or just trying to make ends meet, I would love to help you examine your options. As a Palos Verdes reverse mortgage lender, I can help people throughout the state of California
C2 Reverse Mortgage
A division of C2 Financial Corp
CA DREBroker #01821025, NMLS #135622